Posted January 24, 2012
FIGA Attorney's Fees "Covered Claim" 627.428
Florida Supreme Court Determines That FIGA Is Not Obligated To Pay An Attorney Fee Award Under 627.428(1), If The Underlying Policy Does Not Expressly Provide Coverage For A Section 627.428(1) Award
Petty v. Fla. Ins. Guaranty Ass'n, 37 FLW S34a (Fla. Jan. 19, 2012)
37 Fla. L. Weekly D46 (Fla. 2nd DCA, January 6, 2012)
After Diane Petty and her husband suffered hurricane damage to their home, they presented a claim to their homeowner's insurer for compensation. The insurer paid some of the damages, but the insured claimed that additional damage had been sustained, and demanded appraisal. The insurer contested the obligation to participate in an appraisal before the insured went to mediation. The insured filed suit to compel appraisal and for breach of the policy. Eventually, the insurer recognized its error and agreed to go to appraisal. The appraisal determined additional damages were sustained and an award was entered in favor of the insured. The insurer paid the appraisal award. Before it could resolve the insured's claim for attorney's fee, pursuant to 627.428(1), Fla. Stat., the insurer became insolvent. The Florida Insurance Guaranty Association was then named as a defendant to the litigation in lieu of the insolvent carrier.
Ms. Petty then asked FIGA to pay the unpaid attorney's fees incurred in litigating the underlying claim. Because all of the damages owed under the coverage provisions had been paid, FIGA denied the claim for fees. FIGA asserted that attorney's fees owed pursuant to § 627.428 were not a "covered claim" for which FIGA was liable pursuant to §631.54, Fla. Stat. The trial judge disagreed with FIGA and on the authority of Florida Insurance Guaranty Ass'n v. Soto, 979 So. 2d 964 (Fla. 3d DCA 2008) granted summary judgment in favor of the insured.
FIGA appealed to the 2nd DCA, who reversed the summary judgment in favor of the insured, finding an express and direct conflict with the Soto opinion. The insured sought review at the Florida Supreme Court, who approved the 2nd DCA's opinion. The court noted that §627.428 provides that an insured will be entitled to an attorney's fee award when coverage is disputed and the insured prevails. See Pepper's Steel & Alloys, Inc. v. United States, 850 So. 2d 462, 465 (Fla. 2003). Previously, the court had stated, the purpose of this statute is "to discourage insurance companies from contesting valid claims, and to reimburse insureds for their attorney's fees incurred when they must enforce in court their contract with the insurance company." Id. (quoting Bell v. U.S.B. Acquisition Co. , 734 So. 2d 403, 411 n.10 (Fla. 1999)).
Further, FIGA's obligations are defined by the FIGA Act, which provides
that FIGA shall "[b]e obligated to the extent of the covered claims existing" prior to an
insurer's adjudication of insolvency. Section 631.54(3) defines a covered claim as:
an unpaid claim, including one of unearned premiums, which arises out of, and is within the coverage, and not in excess of, the applicable limits of an insurance policy to which this part applies, issued by an insurer, if such insurer becomes an insolvent insurer and the claimant or insured is a resident of this state at the time of the insured event or the property from which the claim arises is permanently located in this state.
A plain reading of section 631.54(3) indicates that a covered claim must meet two distinct requirements: (1) it must arise, or originate, from an insurance policy and (2) it must be within the coverage of, or be included within the risks taken on and losses protected against in, an insurance policy.
The court rejected the insured's argument that her fee award was impliedly covered by the policy because Florida law makes the provisions of §627.428 an "implicit part of every insurance policy issued in Florida." See State Farm Fire & Cas. Co. v. Palma, 629 So. 2d 830, 832 (Fla. 1993). The court agreed with the Second District that ""the fact that section 627.428 is an implicit part of an insurance policy does not mean that the insured's claim against the insurer for fees and costs is part of the policy's 'coverage.' " Petty, 44 So. 3d at 1194. There is a clear difference between an obligation to pay fees that is imposed by operation of law upon a party due to its behavior under the insurance contract and an obligation imposed upon a party by an express provision for which the party contracted." The court concluded that the statute imposes an obligation to pay a fee award upon an insurer that has wrongfully contested a valid claim. However, "it does not alter the coverage provisions of the insurance contract itself."
Click on the link below to read the Opinion filed January 19, 2012:
Petty v. Florida Insurance Guaranty Association
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